Monday, April 01, 2013

You hear these advice always. Invest and don't punt. Invest long term. The longer you hold the stock, the better your investment return. When the stock falls, just buy more. Same investment is now cheaper, invest more!

Now consider this story.

You read about the company venturing into another country, just when that country is announcing some interesting projects. You get optimistic about the company, right? Analysts are optimistic too.

So you invest in it.

Then came another opportunity.

Company announce a share split plus rights issue.

Rights issue can't be that bad, right? Especially when the company is now having hot new project in another country. Times are exciting and the company 'invites' you to invest more money into the company by subscribing to the rights issue.

So you decided to invest more, more so since you noted that the company was also buying back their own shares.

The company shares meanwhile started to announce weak set of earnings. Stocks started to decline.

7 months after you had subscribed to the rights issue, the stock, due to continued weak earnings, fell to its historical lows. The owners of the company too agree that the stock was cheap. So cheap that they decided to privatise it!

Now get this.Your cost of shares after the rights issues was 6.25.The company privatisation offer was a very generous 2.60!!!!!!!

OUCH!!!!

Now seriously you tell me, who in the right mind want to be a retail investor when incidents like this occur? And to add serious salt to your injury, last year, the local business papers suggested the company was planning to relist its shares again!!!!

How?

Isn't this delisting and relisting giving the stock exchange such a horrible stench?

And you know very well, since the stock exchange is a listed entity, it is a business and as a business, the business will most likely allow the relisting because such exercise will generate revenue for the stock exchange.

But at what cost?

You tell me....

So if retail investors shun our stock exchange, can you really blame them?

When you see incidents like this happen in our stock exchange, won't it scare away retail investors?

My point again?

Let me paste what I wrote in my last posting.

Bursa, remind yourself you are a stock exchange. Look after the
exchange. Make sure you protect your other customers, the minority
shareholders, fairly. That's the most important thing. Who wants to
invest when they run the risk of being treated unfairly and not being
compensated for taking the risk to invest their hard earned money in
shares? Once the protection is there, slowly but surely, the retail
investors will flow back into the market.

Stock market is for any company to make big buck out from the fool of all the majority of shareholders. They need to sell/distribute at very high price to the very greedy & excited investing public & collect/buy at the very damn dirt cheap price through buy back from their short selling activities or forceful privatization at the expense of the very ignorant public.This is the very uncomfortable harsh reality of true life.